REPORT TITLE:
Employment and Training Fund


DESCRIPTION:
Repeals the employment and training fund and payroll tax.

 
SB SMO 99-017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           504
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO THE EMPLOYMENT AND TRAINING PAYROLL TAX. 


BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Hawaii's poor business climate has been the
 
 2 subject of many newspaper and magazine articles printed across
 
 3 the country.  This negative publicity works against the State's
 
 4 efforts to attract capital and new economic activity to the
 
 5 islands.  The Legislature must begin to search our laws to
 
 6 correct past decisions that add unnecessarily to the cost of
 
 7 doing business in the State.
 
 8      Payroll taxes and insurance protection for workers add up to
 
 9 a heavy burden on employers.  Hawaii's workers' compensation,
 
10 temporary disability, and prepaid health care coverages, taken
 
11 together, are the most broad based and expensive employee
 
12 benefits in the nation for employers.  The broad scope of these
 
13 benefits work against fulltime employment;  many employers are
 
14 forced by the expense of the system to turn to part-time workers
 
15 who don't work enough hours to earn benefits.  This adds to the
 
16 problem of workers forced into taking two or three jobs just to
 
17 survive.
 
18 
 
19      In 1991, the Legislature added an additional .05% assessment
 
20 on wages subject to unemployment taxes to fund an Employment and
 
21 Training Fund.  This law was to sunset at the end of 1996.  Many 
 
SB SMO 99-017
Page 2                                                     
                                     S.B. NO.           504
                                                        
                                                        

 
 1 employers felt it would be allowed to die because the training
 
 2 programs had affected employment only marginally.  Unfortunately,
 
 3 instead of repealing the provision, the Legislature expanded the
 
 4 purposes for which the funds could be used to include grants and
 
 5 subsidies to agencies who provide services for the School to Work
 
 6 Program.  As laudable as this program might seem, it should not
 
 7 be funded by a tax on employers who are already doing a service
 
 8 by providing jobs and training.  The Legislature intends to
 
 9 reverse this decision and repeal the assessment as a first step
 
10 toward reducing employers' costs.
 
11      SECTION 2.  Section HRS 383-128, Hawaii Revised Statutes, is
 
12 repealed.
 
13      ["83-128  Employment and training fund established.(a)
 
14 Effective January 1, 1992, there is established in the state
 
15 treasury, apart from all other funds in this State, a special
 
16 fund to be known as the employment and training fund.  All
 
17 assessments collected pursuant to section 383-129 and all other
 
18 moneys received by the fund from any other source shall be
 
19 deposited into the employment and training fund.
 
20      (b)  The moneys in the employment and training fund may be
 
21 used for funding:
 
22      (1)  The operation of the state employment service for which
 
23           no federal funds have been allocated;
 

 
SB SMO 99-017
Page 3                                                     
                                     S.B. NO.           
                                                        
                                                        

 
 1      (2)  Business-specific training programs to create a more
 
 2           diversified job base and to carry out the purposes of
 
 3           the new industry training program pursuant to section
 
 4           394-8;
 
 5      (3)  Industry or employer-specific training programs where
 
 6           there are critical skill shortages in high growth
 
 7           occupational or industry areas;
 
 8      (4)  Training and retraining programs to assist workers who
 
 9           have become recently unemployed or likely to be
 
10           unemployed;
 
11      (5)  Programs to assist residents who do not otherwise
 
12           qualify for federal or state job training programs to
 
13           overcome employment barriers; and
 
14      (6)  Training programs to provide job-specific skills for
 
15           individuals in need of assistance to improve career
 
16           employment prospects.
 
17      (c)  The director may require employers assisted by any of
 
18 these programs to contribute up to fifty per cent of the cost of
 
19 such assistance in cash or in-kind contributions.
 
20      (d)  The department is authorized to provide grants and
 
21 subsidies to contract for employment, education, and training
 
22 services from public and private agencies and nonprofit
 

 
SB SMO 99-017
 
Page 4                                                     
                                     S.B. NO.           
                                                        
                                                        

 
 1 corporations.  Grants and subsidies for these services shall be
 
 2 exempt from chapter 42F so funds for these services may be
 
 3 expended in a timely manner to effectuate the purposes of this
 
 4 section.  All other disbursements shall be in accordance with
 
 5 chapter 103D.
 
 6      (e)  For purposes of grants and subsidies awarded under
 
 7 subsection (d), any organization requesting a grant or subsidy
 
 8 shall:
 
 9      (1)  Be licensed and accredited, as applicable, under the
 
10           laws of the State;
 
11      (2)  Have at least one year's experience with the project or
 
12           in the program area for which the request or proposal
 
13           is being made; except that the director may grant an
 
14           exception where the project or program area deals with
 
15           new industry training; and
 
16      (3)  Be, employ, or have under contract persons who are
 
17           qualified to engage in the program or activity to be
 
18           funded by the State.
 
19      (f)  Recipients of grants or subsidies shall be subject to
 
20 the following conditions:
 
21      (1)  Any organization requesting a grant or subsidy shall
 
22           submit its request together with all the information
 
23           required by the director on an application form
 
24           provided by the department;
 

 
SB SMO 99-017
Page 5                                                     
                                     S.B. NO.           
                                                        
                                                        

 
 1      (2)  The recipient of a grant or subsidy shall not use
 
 2           public funds for purposes of entertainment or
 
 3           perquisites;
 
 4      (3)  The recipient of a grant or subsidy shall comply with
 
 5           applicable federal, state, and county laws;
 
 6      (4)  The recipient of a grant or subsidy shall comply with
 
 7           any other requirements the director may prescribe;
 
 8      (5)  The recipient of a grant or subsidy shall allow the
 
 9           director, the legislative bodies, and the legislative
 
10           auditor full access to records, reports, files, and
 
11           other related documents so that the program,
 
12           management, and fiscal practices of the grant recipient
 
13           may be monitored and evaluated to assure the proper and
 
14           effective expenditure of public funds;
 
15      (6)  Every grant or subsidy shall be monitored according to
 
16           rules established by the director to ensure compliance
 
17           with this section; and
 
18      (7)  Any recipient of a grant or subsidy under this section
 
19           who withholds or omits any material fact or
 
20           deliberately misrepresents facts to the director or who
 
21           violates the terms of the recipient's contract shall be
 
22           in violation of this section and, in addition to any
 
23           other penalties provided by law, shall be prohibited
 

 
SB SMO 99-017
Page 6                                                     
                                     S.B. NO.           
                                                        
                                                        

 
 1           from applying for a grant or subsidy under this section
 
 2           for a period of five years from the date of
 
 3           termination.
 
 4      (g)  The director shall submit a report to the legislature
 
 5 on the status of the employment and training fund, including
 
 6 expenditures and program results, at least twenty days prior to
 
 7 the convening of each regular legislative session.
 
 8      (h)  The director of finance shall act as the treasurer and
 
 9 custodian of the employment and training fund, invest those
 
10 moneys in accordance with applicable laws and rules, and disburse
 
11 the moneys in the employment and training fund in accordance with
 
12 directions by the director of labor and industrial relations.
 
13 All interest earned from investment of moneys in the employment
 
14 and training fund shall be deposited in the fund.  The director
 
15 of finance shall be liable on the director's official bond for
 
16 the faithful performance of all duties in connection with the
 
17 employment and training fund.  All sums recovered on the surety
 
18 bond for losses sustained by the employment and training fund
 
19 shall be deposited in the fund.
 
20      (i)  Administrative costs for the collection of employment
 
21 and training fund contributions and for costs related to the
 
22 establishment and maintenance of the employment and training fund
 
23 shall be borne by the fund beginning with fiscal year 1992-1993
 
24 and thereafter.
 

 
SB SMO 99-017
Page 7                                                     
                                     S.B. NO.           
                                                        
                                                        

 
 1      (j)  The director may establish positions and hire necessary
 
 2 personnel to establish and administer the employment and training
 
 3 fund without regard to chapters 76 and 77."]
 
 4 
 
 5 
 
 6      SECTION 3.  Section HRS 383-129, Hawaii Revised Statutes, is
 
 7 repealed.
 
 8      "[383-129  Employment and training assessment.(a)
 
 9 Effective January 1, 1992, through June 30, 1997, and from
 
10 January 1, 1999 through December 31, 2000, in addition to
 
11 contributions determined by section 383-68, every employer,
 
12 except an employer who has selected an alternative method of
 
13 financing liability for unemployment compensation benefits
 
14 pursuant to section 383-62 or an employer who has been assigned a
 
15 minimum rate of zero per cent or the maximum rate of five and
 
16 four-tenths per cent in accordance with section 383-68, shall be
 
17 subject to an employment and training fund assessment at a rate
 
18 of .05 per cent of taxable wages as specified in section 383-61.
 
19      (b)  Collections from the employment and training assessment
 
20 shall be made in the same manner and at the same time as any
 
21 contributions required under section 383-61, and shall not be
 
22 deducted, in whole or in part, from the wages of individuals in
 
23 an employer's employ.
 
24      (c)  Any assessments collected pursuant to this section
 
25 shall remain separate and shall not be included in any manner in
 
SB SMO 99-017
Page 8                                                     
                                     S.B. NO.           
                                                        
                                                        

 
 1 computing unemployment contribution rates assigned to employers
 
 2 in accordance with sections 383-63 to 383-68.
 
 3      (d)  The director may impose penalty and interest on
 
 4 delinquent employment and training assessments in the same manner
 
 5 as provided for contributions to the unemployment compensation
 
 6 fund in section 383-73.  For purposes of computation of penalty
 
 7 and interest under this subsection, employment and training
 
 8 assessments shall be considered part of the employer's
 
 9 contributions to the unemployment compensation fund.
 
10      (e)  Collection of money from an employer delinquent in
 
11 paying employment and training assessments or contributions to
 
12 the unemployment compensation fund pursuant to this chapter shall
 
13 first be applied to interest and penalty, then applied to
 
14 delinquent unemployment compensation contributions, and finally
 
15 to delinquent employment and training assessments."]
 
16 
 
17      SECTION 4.  Statutory material to be repealed is bracketed.
 
18      SECTION 5.  This Act shall take effect upon its approval.
 
19 
 
20                           INTRODUCED BY:  _______________________
 

 
SB SMO 99-017